Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Selling accounts receivable to obtain short-term funds is called:

Pledging

Securitization

Factoring

Discounting

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Verified step by step guidance

Understand the concept of factoring: Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount to obtain immediate cash.

Differentiate factoring from other terms: Pledging involves using accounts receivable as collateral for a loan, while securitization involves bundling receivables into securities to sell to investors. Discounting typically refers to selling promissory notes or other financial instruments at less than their face value.

Identify the key characteristic of factoring: The business transfers ownership of the receivables to the factor, who then assumes the risk of collection and provides immediate funds to the business.

Relate the term to the problem: The question asks for the term describing the sale of accounts receivable to obtain short-term funds, which aligns with the definition of factoring.

Conclude that the correct answer is factoring, as it matches the description provided in the problem.